Liability for Misleading Disclosure of Climate Risks

There have been a number of recent enforcement actions in the United States alleging that major fossil fuel companies, such as ExxonMobil Corp (Exxon) and Peabody Energy, have not adequately or appropriately disclosed the risks posed to their businesses by climate change, as required under U.S. federal securities law. Climate change risks encompass both physical and non-physical risks. Physical risks involve damage to assets and disruption to operations caused by extreme events. Non-physical risks involve the need to comply with changing climate regulatory requirements, the indirect effects of those requirements, and business trends that include declining demand for carbon intensive products. The rationale behind these requirements is that full and timely disclosure of material business risks is critical to market transparency.

In addition, information on the climate risk exposure of companies is increasingly sought by large-scale investors to support their long term decision-making. Australian corporate and securities law is broadly similar to that in the United States. As confirmed by a recent legal opinion issued by Sydney barristers Noel Hutley SC and Sebastian Hartford-Davis for the Centre for Policy Development and the Future Business Council, Australian listed companies have obligations to disclose material business risks posed by climate change, with potential liability implications for company directors who fail to consider and disclose foreseeable climate risks. This presentation explores recent developments in the United States and the likelihood of similar actions in Australia.

Jacqueline Peel is a Professor of law and Associate Director of the Centre for Resources, Energy and Environmental Law at the University of Melbourne Law School. She is also a co-chair of the International Environmental Law Interest Group of the American Society of International Law and an expert member of the International Bar Association’s working group on climate remedies.

Jacqueline’s research and expertise is focused in the areas of climate law and regulation, environmental law and risk management. In addition to her roles in international legal professional bodies she has provided advice and undertaken consultancy work on issues relevant to climate change and environmental law for the Victorian government, the Productivity Commission, the Californian Water Commission, the European Commission and the philanthropic organisation, the Children’s Investment Fund Foundation. Together with colleagues from the United States, Jacqueline holds two ARC grants to investigate the role of liability mechanisms in clean energy regulation, and legal and policy mechanisms for spurring energy transition in the private sector. Jacqueline has authored 7 books and over 50 journal papers, as well as presenting at conferences in Australia and internationally on topics of climate law and energy transition.